Bangko Sentral ng Pilipinas Issues Guidelines on the Management of Liquidity Risk by Islamic Banks

The Bangko Sentral ng Pilipinas (BSP) has approved a liquidity risk management framework for Islamic Banks and Islamic Banking Units in the Philippines. The Monetary Board approved Circular No. 1116 (the Circular) on the 25th of May 2021, which is based on the existing liquidity risk management framework for conventional banks, with additional provisions to cover Islamic banking.

Why it Matters?

The guidelines emphasise Shariah compliance in liquidity risk management and the choice of instruments/tools to mitigate liquidity risk, and provide guidance on the treatment of Islamic banking accounts such as profit and loss sharing investment accounts. The aim of the regulatory issuance is to create an environment that will enable Islamic banks to operate a...